“BoU will extend for six months effective from 1st April 2021 the Credit Relief Measures (CRM) and also maintain the Covid-19 Liquidity Assistance Program (CLAP) to supervised financial institutions.
BoU will review CLAP from time to time as the pandemic evolves to ensure viability of solvent supervised financial institutions that may come under liquidity stress during the pandemic and to support credit extension”, said Deputy Governor, Michaeil Atingi-Ego.
The Bank of Uganda has
extended for six months effective April 1, 2021 the Credit Relief Measures that
the banking industry offered their borrowers to help them overcome the impacts
of the Coronavirus (COVID-19) pandemic on the economy.
The Bank will also extend
its financial support to financial institutions that may be in distress.
April 2020, Bank of Uganda (BOU) put in place Credit Relief Measures aimed at
maintaining Financial Stability, and reducing the Economic Impact of COVID-19, especially
due to the national lockdown.
came amidst fears that the private sector would not be able to pay back the
loans under the then agreed terms and conditions as business activities
declined, some to a complete halt.
were also issued to Commercial Banks, Credit Institutions and Microfinance
Deposit-taking Institutions (MDIs) on how to apply the measures.
The regulator, the BOU
allowed the regulated financial institutions to restructure any loan affected
by the COVID-19 pandemic as long as this is done within one-year effective
April 1 2020.
this period, borrowers are eligible to have their loans restructured or updated
for up to two times, and any further restructuring would be applied for and
approved by BOU.
any credit relief granted is given at the discretion of the institution. As the impact of the
pandemic lag, the BOU has found it necessary to continue with the measures.
“BOU will extend for six months effective from 1st April
2021 the Credit Relief Measures (CRM) and also maintain the COVID-19 Liquidity
Assistance Program (CLAP) to supervised financial institutions.
BOU will review CLAP from time to time as the pandemic
evolves to ensure viability of solvent supervised financial institutions that
may come under liquidity stress during the pandemic and to support credit
extension”, said Deputy Governor, Michael Atingi-Ego. Experts say it was
only prudent for the BOU to extend the relief measures.
it has taken the decision to extend COVID credit relief measures for
6 months from April 1st, when the extraordinary measures were otherwise
due to come to an end,” said the Standard Chartered Bank East Africa Head
of Research, Razia Khan.
implications of this decision are likely minimal, as a ‘hold’ in interest rates
was broadly expected. We expect the UGX to continue to be supported by
healthy portfolio investor inflows, with fiscal risks unlikely to be seen as
overriding,” says Khan.
The Bank says that
while there is some economic recovery generally since the since the beginning
of the financial year in July, it is happening at an uneven pace as social
distancing measures continue to affect certain activities in the service sector.
The main affected sectors
remain education, hospitality, and tourism.
Hope is pegged on how
vaccines will be rolled out worldwide.
economic outlook continues to be highly conditional on the timeline of the
world-wide vaccines rollout and the course of the virus and its new
variants." Dr Michael Atingi-Ego added.
But in the Monetary
Policy Statement issued Monday, the Deputy Governor, Dr Michael Atingi-Ego says
that towards the end of the year 2020, the economy slowed down compared to the
earlier months immediately following the easing of the lockdown.
// Cue in: “The economic
Cue out: … infection
The bank says the
economy grew by about 2.6% in the quarter ended December, down from a growth of
9.2% in the earlier quarter ended September 2020.
This financial year’s
growth is expected to rise to between 3.0% and 3.5% and increase to between 4
and 4.5% next financial year. This is pegged on the
expected availability of a vaccine in Uganda and her trading partners, a
development that would boost Uganda’s exports and the tourism sector, as well
as ease the uncertainty by foreign investors, according to Dr Atingi-Ego.
//Cue in: “As the
Cue out: … outer years
Meanwhile, the Bank
has decided to maintain the Central Bank Rate, its basis for influencing the
lending rates at a low 7%, in a bid to encourage further reductions in
commercial interest rates and boost credit demand.
The Interest rates
have remained high despite the BOU lowering the rate, with an average interest
rate by commercial banks at 18% per annum.